SECTION 5.9917. Application, Binder, Policy Issuance, Renewal and Cancellation

(a) An agent shall maintain and submit, at the request of the Association, written documentation that indicates that:

(1) At least two insurance companies, not in the same holding company as defined in Insurance Code Article 21.49-1, licensed to write and actually writing residential property insurance in Texas have declined to provide residential property insurance (the names of the two insurance companies shall be identified), and the applicant has not received a valid offer of comparable residential property insurance from an insurance company licensed in Texas, not including any surplus lines insurers; and

(2) There are no outstanding taxes, assessments, penalties or charges with respect to the property to be insured, except those covered under a properly filed deferral affidavit in compliance with §33.06 of the Property Tax Code; and

(3) The applicant has not received written notice from an authorized public entity stating that the property is in violation of any building, housing, air pollution, sanitation, health, fire or safety code, ordinance or rule.

(b) The Association may specify what documentation would fulfill the requirements of subsection (a)(1)-(3) of this section.

(c) The Association is under no obligation to issue residential property insurance unless the property would constitute an insurable risk in accordance with the Association's underwriting rules. The Association, in determining whether the property is insurable, shall give no consideration to the condition of surrounding property or properties, where such condition is not within the control of the applicant.

(d) The Association shall deliver a policy or binder to the agent upon acceptance of the risk. The Association shall pay the authorized commission to the agent.

(e) The effective date of coverage shall be no earlier than the date and time that the Association both accepts and binds the risk. The policy shall be issued in the name of the Association, as insurer.

(f) The Association may suspend the taking of applications in the state when issuance of binders and/or policies has been suspended by the Texas Windstorm Insurance Association. The Association may also suspend the taking of applications when and in the part of the state it finds that an ongoing event threatens to create an imminent danger of catastrophic losses.

(g) The policy shall be issued for a term of one year.

(h) If the property is found to be an insurable risk but the inspection reveals that there are one or more physical deficiencies, surcharges will be imposed in conformity with the rates and underwriting rules. If the physical deficiencies are corrected and verified, the surcharges shall be revised.

(i) In accordance with the underwriting rules of the Association except for subsection (k) of this section, at least 30 days prior to the expiration of an Association policy, the Association shall do one of the following:

(1) send an offer to the policyholder with a copy to the agent to renew the Association policy for a term of one year at the Association rates that will be in force on the effective date of the renewal;

(2) send an offer to the policyholder with a copy to the agent to renew the Association policy conditioned upon a change in coverage, limits and/or terms or conditions; or

(3) send a notice to the policyholder with a copy to the agent of nonrenewal of the Association policy.

(j) If a payment for an estimated premium, annual premium or any installment payment is refused or dishonored by the bank upon which it is drawn for any reason, coverage under the Association policy shall be cancelled for nonpayment of premium, and the Association shall send a notice of cancellation.

(k) Every two years starting with the second renewal, the policyholder shall reapply for residential property insurance in the voluntary market. If a diligent effort has been made and the policyholder is unable to obtain residential property insurance, as evidenced by two current declinations from insurers licensed to write property insurance and actually writing residential property insurance in the state, the policyholder will be eligible for renewal of Association coverage. If an Association policyholder receives a valid offer of comparable residential property insurance from an insurance company licensed by the State of Texas, other than a surplus lines carrier, then the policyholder is no longer eligible for coverage and the Association may nonrenew the policy.

(l) The Association shall not issue a policy to an applicant if the applicant or any proposed named insured is indebted to the Association on a prior Association policy. If the new Association policy has already been bound or issued, then the Association shall cancel that binder or policy and deduct from any return premium the amount that the Association is owed from the prior Association policy.

(m) Binders shall be issued for a definite period, not to exceed ninety days.

(n) Policies issued are not subject to flat cancellation and are subject to a minimum earned premium as stated in the underwriting rules.

(o) If an insurance policy will not be issued, the full earned premium must be charged.

(p) A binder shall terminate upon the acceptance of a risk by the Association and the payment of any premium due; or upon the cancellation of a risk and notice of reasons for the cancellation given to the applicant and agent.

(q) The Association shall not cancel a policy or binder issued by it, except:

(1) for a condition which would have been grounds for nonacceptance of the risk had such condition been known to the Association at the time of acceptance;

(2) for property that does not meet the underwriting rules;

(3) for nonpayment of premium, including nonpayment of premium on a prior Association policy;

(4) fraud;

(5) material misrepresentation;

(6) evidence of incendiarism by the insured or another acting on the insured's behalf; or

(7) at the written request of an insured.

(r) The Association shall send notice of cancellation, stating the reasons for cancellation to an insured and agent. The cancellation shall take effect in accordance with the policy provisions.

(s) Any cancellation notice to an insured, except for the cancellation set forth in subsection (q)(7) of this section, shall be accompanied by a statement that the insured has a right to appeal as provided in §5.9919 of this subchapter (relating to Right to Appeal).

(t) If a property meets all underwriting requirements, the Association shall calculate the actual annual premium. The Association shall remit a return premium to the applicant if the provisional binder premium exceeds the actual annual premium. The Association shall bill the applicant for additional premium if the actual annual premium exceeds the provisional binder premium.

(u) The Association shall cancel a binder on a pro rata basis. If an applicant requests cancellation of a binder, the Association shall cancel the binder on a pro rata basis.

Source Note: The provisions of this §5.9917 adopted to be effective May 28, 2003, 28 TexReg 4153